<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: January 27, 2000
SERVICE MERCHANDISE COMPANY, INC.
(Debtor-in-Possession as of March 27, 1999)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 1-9223 62-0816060
- ---------------------------- ------------------------ ------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
7100 Service Merchandise Boulevard, Brentwood, TN 37027
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 660-6000
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
Service Merchandise Company, Inc. (the "Company") has filed and
introduced into evidence certain selected preliminary and other financial
information which is attached hereto as Exhibit 99 (the "Exhibit") with the
United States Bankruptcy Court for the Middle District of Tennessee in support
of a motion filed by the Company in connection with its voluntary proceedings
for reorganization under Chapter 11 of title 11 of the United States Bankruptcy
Code in Case No. 399-02649.
The Exhibit contains selected preliminary unaudited financial
information which is subject to adjustment or revision pending completion of the
Company's physical inventory count and other ordinary year-end adjustments. The
Exhibit contains summary information for periods and in formats which may be
different from those contained in the Company's reports pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
financial information contained in the Exhibit may vary from that presented in
the Company's Exchange Act reports. Such information may not be indicative of
the Company's financial condition or operating results for the periods reflected
in the Company's financial statements or in its reports pursuant to the Exchange
Act and investors and potential investors in the Company's securities are
cautioned to refer to the Exchange Act filings. Moreover, the Exhibit and other
communications from the Company may reflect trends or forward-looking
information regarding the Company's operating performance that may not be
realized and which are subject to significant business, economic and competitive
uncertainties and contingencies, including those described in the Company's
filings with the Securities and Exchange Commission, many of which are beyond
the Company's control. Consequently such matters should not be regarded as a
representation or warranty by the Company that such matters will be realized or
are indicative of the Company's financial condition or operating results for
future periods or the periods covered in the Company's reports pursuant to the
Exchange Act. Actual results for such periods (and the periods covered in the
Exhibit) may differ materially from the information contained in the Exhibit and
the Company undertakes no obligation to update or revise such Exhibit. This
information is not a substitute for, and should be read in conjunction with, the
Company's reports filed pursuant to the Exchange Act. The Exhibit was not
examined, reviewed or compiled by the Company's independent public accountants.
The Company cautions investors or potential investors not to place undue
reliance upon the information contained in the Exhibit.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SERVICE MERCHANDISE COMPANY, INC.
Date: January 27, 2000 By: /s/ C. Steven Moore
------------------------------------
C. Steven Moore
Senior Vice President, Chief
Administrative Officer, Secretary
and General Counsel
3
<PAGE> 4
EXHIBIT INDEX
No. Exhibit
- --------- -----------------------------------------
99 Certain Preliminary Financial Information
<PAGE> 1
Financial Review--April-December 1999
Preliminary Results vs. Plan ($ in thousands)
<TABLE>
<CAPTION>
Preliminary
Plan Results
---------- -----------
<S> <C> <C>
Net Sales $1,620,622 $1,630,015
Gross Margin In $ 544,987 $ 541,993
Gross Margin Out $ 414,749 $ 425,694
S, G & A
Employment 222,750 236,695
Net advertising 88,028 81,477
Other S, G & A 68,980 57,909
---------- ----------
EBITDAR net of bonus $ 34,990 $ 49,613
Incentive bonus expense 7,902 14,803
---------- ----------
Gross EBITDAR $ 42,892 $ 64,416
</TABLE>
<PAGE> 2
December 1999 Variances to Plan
<TABLE>
<S> <C>
JEWELRY
Sales Variance................ 5.7%
Margin Variance............... 6.8%
Ending Inventory.............. 2.9%
HARDLINES
Sales Variance................ 3.9%
Margin Variance............... 1.3%
Ending Inventory.............. -5.2%
TOTAL
Sales Variance................ 4.6%
Margin Variance............... 4.4%
Ending Inventory.............. -2.5%
</TABLE>
<PAGE> 3
Financial Review--Flash Report
Continuing Operations Perpetual Inventory--Actual
vs. Plan ($ in millions)
<TABLE>
<CAPTION>
June July August September October November December
------- ------- ------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan 526.198 557.944 595.931 670.771 791.192 824.995 592.886
Actual 497.188 522.072 583.743 667.264 786.66 822.978 577.877
</TABLE>
<PAGE> 4
Financial Review--Flash Report
Continuing Operations Sales, Accounts Payable and
Perpetual Inventory--($ in millions)
<TABLE>
<CAPTION>
Apr May Jun Jul Aug Sep Oct Nov Dec
------- ------- ------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Continuing Sales 112.669 150.483 167.049 101.171 110.16 153.235 121.696 207.74 505.538
Accounts Payable 9.504 12.925 26.435 46.543 62.14 112.833 112.781 102.016 69.33
Perpetual Inventory 593.068 549.98 497.188 522.072 583.743 667.264 786.66 822.978 577.877
</TABLE>
<PAGE> 5
Financial Review--Flash Results
Key Items Out-of-Stock % with In-Transit
<TABLE>
<CAPTION>
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- ------ ----- ----- ----- ----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hardlines 13.9 11.6 18.1 8.5 8.3 8.2 5.2 6.05 3.5 1.79 02.51
Jewelry 07.3 0.46 6.6 3.0 1.9 1.8 1.7 0.94 0.59 0.5 00.75
Total 10.3 8.00 14.1 5.7 5.0 4.5 3.2 3.61 2.1 1.19 01.70
</TABLE>
<PAGE> 6
Financial Review--Flash December 1999
Quarterly Continuing EBITDAR Improvement
($ in 000's)
<TABLE>
<CAPTION>
Q1 1999 vs. Q1 1998 Q2 1999 vs. Q2 1998 Q3 1999 vs. Q3 1998 Q4 1999 vs. Q4 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
($ in 000's) ($14,208) ($1,442) $2,068 $21,163
</TABLE>
[New management team; Voluntary Bankruptcy Petitions filed in March 1999]
<PAGE> 7
Financial Review--Daily Availability
Borrowing Base Summary ($ in millions)
<TABLE>
<CAPTION>
18-Oct 19-Oct 20-Oct 21-Oct 22-Oct 25-Oct 26-Oct 27-Oct 28-Oct 29-Oct 1-Nov 2-Nov
------- ------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Borrowing Base 644.012 644.012 644.012 644.012 665.78 665.78 665.78 665.78 680.986 680.986 680.986 680.986
Availability 198.767 185.992 179.717 175.93 184.584 181.863 178.945 175.707 180.704 166.485 163.399 157.973
Extensions of Credit 445.245 458.02 464.295 468.082 481.196 483.917 486.835 490.073 500.282 514.501 517.587 523.013
<CAPTION>
3-Nov 4-Nov 5-Nov 8-Nov 9-Nov 10-Nov 12-Nov 15-Nov 16-Nov 17-Nov 18-Nov 19-Nov
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Borrowing Base 680.986 680.986 701.094 701.094 701.094 701.094 729.125 729.125 729.125 729.125 729.125 743.369
Availability 154.335 149.442 159.416 154.437 154.688 149.282 172.879 175.05 171.63 173.807 169.734 169.347
Extensions of Credit 526.651 531.544 541.678 546.657 546.406 551.812 556.246 554.075 557.495 555.318 559.391 574.022
<CAPTION>
22-Nov 23-Nov 24-Nov 26-Nov 29-Nov 30-Nov 1-Dec 2-Dec 3-Dec 6-Dec 7-Dec 8-Dec
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Borrowing Base 743.369 743.369 743.369 748.833 748.833 748.833 748.833 750 750 750 750 750
Availability 173.639 172.9 172.456 180.399 197.916 200.996 201.202 202.616 229.493 250.526 249.188 269.443
Extensions of Credit 569.73 570.469 570.913 568.434 550.917 547.837 547.631 547.384 520.507 499.474 500.812 480.557
<CAPTION>
9-Dec 10-Dec 13-Dec 14-Dec 15-Dec 16-Dec 17-Dec 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Borrowing Base 724.605 724.605 724.605 724.605 724.605 724.605 659.875 659.875 659.875 659.875 659.875 627.197
Availability 238.681 256.866 277.592 302.709 319.827 333.81 277.499 296.568 315.12 347.064 363.703 344.643
Extensions of Credit 485.924 467.739 447.013 421.896 404.78 390.795 382.376 363.307 344.755 312.811 296.172 282.554
<CAPTION>
27-Dec 28-Dec 29-Dec 30-Dec 31-Dec
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Borrowing Base 627.197 627.197 627.197 627.197 546.767
Availability 374.103 389.317 402.173 403.948 324.906
Extensions of Credit 253.094 237.88 225.024 223.249 221.861
</TABLE>
[Minimum Availability was $149.3 million on 11/10/99;
Peak Borrowings were $574.0 million on 11/19/99;
Maximum Availability was $403.9 million on 12/30/99]
<PAGE> 8
Net Changes in Assets and Liabilities
Monthly and Cumulative Net Changes ($ in 000's)
<TABLE>
<CAPTION>
Jan & Feb Mar Apr May Jun Jul Aug Sep
--------- ------- ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plan -55699 -112785 -58466 -15030 -25278 -23814 -12734 -22072
Preliminary Results -55698 -112785 -58466 -15030 -27107 -9024 6940 4508
Cumulative Plan April through December -58466 -73496 -98774 -122588 -135322 -157394
Cumulative Preliminary Results April through December -58466 -73496 -100603 -109627 -102687 -98179
<CAPTION>
Oct Nov Dec
------- ------- -------
<S> <C> <C> <C>
Plan -22319 -10475 49075
Preliminary Results -20143 -9357 57913
Cumulative Plan April through December -179713 -190188 -141113
Cumulative Preliminary Results April through December -118322 -127679 -69759
</TABLE>
[New management team; Voluntary Bankruptcy Petitions filed March 1999]
<PAGE> 9
Preliminary Results vs. Plan Cash Flow
April through December ($ in thousands)
<TABLE>
<CAPTION>
Net Changes in Assets and Liabilities Cash Generated from Working Capital Management
------------------------------------- ----------------------------------------------
<S> <C> <C>
Plan -141171 268904
Preliminary Results -69759 304479
Variance 71412 35575
<CAPTION>
Cash Generated from Disposition of Fixed Assets Reduction in Liabilities
----------------------------------------------- ------------------------
<S> <C> <C>
Plan 111 137217
Preliminary Results 70518 295632
Variance 70407 158415
</TABLE>
<PAGE> 10
Preliminary Results vs. Plan Cash Flow
(in thousands)
<TABLE>
<CAPTION>
Preliminary
Results Plan Variance
----------- --------- ---------
<S> <C> <C> <C>
Net Changes in Assets and Liabilities $ (69,759) $(141,171) $ 71,412
Depreciation and amortization 30,330 36,991 (6,661)
Book (gains) losses on sales of assets (22,553) 4,814 (27,367)
--------- --------- ---------
CASH FROM EARNINGS (61,981) (99,366) 37,385
Reduction in Inventory 86,214 140,639 (54,425)
Reduction in Prepaid Expenses & Other Assets 48,504 49,912 (1,408)
Reduction in Accounts Receivable 18,424 139 18,285
Reduction in Cash 19,365 27,443 (8,078)
Increase in Trade Payables 60,247 6,818 53,429
Increase in Expense Payables 32,031 9,037 22,994
Increase in Accrued Expenses 39,695 34,916 4,779
--------- --------- ---------
CASH GENERATED FROM
WORKING CAPITAL MANAGEMENT 304,479 268,904 35,575
CASH GENERATED FROM FIXED ASSETS SALES 70,518 111 70,407
Reduction in Bank Debt 162,638 105,179 57,459
Adequate protection payments 36,298 629 35,669
Retirement of IRBs 21,600 21,600 0
Amortization of capitalized leases 15,227 4,124 11,103
Reduction in other pre-petition liabilities 59,869 5,685 54,184
--------- --------- ---------
REDUCTION OF LIABILITIES 295,632 137,217 158,415
CAPITAL EXPENDITURES AND OTHER ITEMS, NET (17,384) (32,432) 15,048
--------- --------- ---------
CHANGES IN CASH MINUS CHANGES IN LIABILITIES $ 0 $ 0 $ 0
</TABLE>
<PAGE> 11
Composition of Preliminary Results
April-December ($ in thousands)
<TABLE>
<CAPTION>
Restructuring
Non- charges & Depreciation
Continuing continuing reorganization Professional Retention and Interest
EBITDAR EBITDAR costs fees payments amortization expense
---------- ---------- -------------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan 34994 -50971 -13859 -20500 -9650 -36994 -39381
Preliminary Results 49613 -33327 -7775 -15419 -9650 -30330 -39732
<CAPTION>
Cumulative
Gains effect of
(losses on) accounting
sales of assets change Net income
--------------- ---------- ----------
<S> <C> <C> <C>
Plan -4814 0 -141171
Preliminary Results 22553 -6566 -69759
</TABLE>
